The Sustainable Growth Rate (SGR) mechanism aims to control spending for certain types of goods and services provided under Medicare Part B. It sets an overall spending target (measured on both an annual and a cumulative basis) for physicians’ services as well as for items — such as laboratory tests, imaging services, and physician-administered drugs — furnished “incident to” (in connection with) physicians’ services. Payment rates are adjusted annually to reflect differences between actual spending and the spending target — upward if spending is below the target, downward if spending is above the target.
Policymakers had two main goals when they adopted the
SGR mechanism: ensuring adequate access to physicians’
services and controlling federal spending for those services
in a more predictable way than the volume performance standard did. The SGR mechanism has a mixed record with regard to those goals.